Repurchase losses may total $121 billion, wrote Miller, a
former federal bank examiner, in an analyst’s note to clients
dated today. He previously said the tally might range from $54
billion to $106 billion. Losses for Bank of America Corp. could
reach $66 billion in some scenarios, he wrote.

Fannie Mae, Freddie Mac, the Federal Housing Administration
and the Federal Housing Finance Agency “are acting in their own
self-interest as opposed to that of the broader U.S. economy,”
Miller wrote. Their claims “drain capital from the banking
system, and they cause banks to overly tighten credit standards,
which pushes potential home buyers onto the sidelines.”

Bank of America, the biggest U.S. lender by assets, led
decliners in New York trading last week after the FHFA sued 17
banks to recover losses on mortgage-backed securities sold to
Fannie Mae and Freddie Mac. The FHFA is seeking to recoup $196
billion spent on the securities, plus other damages including
civil penalties.

“If we are to get the housing market working again, it’s
our opinion that the FHFA and the government-sponsored
enterprises need to stop punishing banks for their lending
practices from several years ago, even though they may have a
legal right to do so,” Miller wrote.

The FHFA lawsuit makes clear the U.S. “is committed to
breaking up the banking industry,” Richard Bove, an analyst
with Rochdale Securities LLC in Lutz, Florida, said yesterday in
a research note. The U.S. is ignoring risks that the economy may
stall in part because banks stop making loans, he said.

Forbearance Opposed

Neil Barofsky, former special inspector general for the
Troubled Asset Relief Program, said last week in an e-mail he’s
“strongly opposed” to regulatory forbearance for the lenders,
and that any further aid to banks should come with transparency
and accountability.

“The government needs to be as aggressive as possible to
vindicate the taxpayers’ rights to get as much money from the
big banks as possible,” Barofsky said Sept. 2 on Bloomberg
Television. “If the government pulls its punches on a valid
claim that it would have on this claim on that basis, that’s
nothing more than a transfer of money from taxpayer pockets into
the shareholders of Bank of America and other banks and that’s
an opaque, non-transparent bailout.”

FHFA Responds

The FHFA said in a statement today it is focused on issues
other than whether its lawsuits will disrupt the recovery,
endanger the targeted banks, or increase their cost of capital.

“While everyone is concerned with these important issues,
the long-term stability and resilience of the nation’s financial
system depends on investors being able to trust that the
securities sold in this country adhere to applicable laws,” the
agency said. “We cannot overlook compliance with such
requirements during periods of economic difficulty.”

Bank of America said last week that Fannie Mae and Freddie
Mac “acknowledged that their losses in the mortgaged-backed
securities market were due to the unprecedented downturn in
housing prices and other economic factors,” said Larry DiRita,
a spokesman for the Charlotte, North Carolina-based lender.